Wednesday, November 19, 2008

Futures on Intrade's Future

These are uncertain times when we should place a premium on transparency.

Knowing the likelihood that your customer, supplier or counterparty will be in business in a year or two is valuable information. Being able to hedge against the closure of a business that you are exposed to have risk management and wealth preservation potential.

14 comments:

This comment may display a great stupidity on my part, but how exactly will settlement be accomplished if intrade ceases to exist? This is not addressed in any satisfactory detail by the "rules" (at least that I could find). At first glance it appears that no party in this contract will be able to collect, or alternatively be liable. At best (depending upon arrangements with the bank associated with intrade "escrows") everyone will simply get their money back. In a more pessimistic view, their cash could be frozen until intrade bankruptcy proceedings are completed. Perhaps they wouldn't even get that, if for some reason contracts were considered assets to pay intrade creditors. Unfortunately I'm not very familiar with Irish commercial law.

I see it differantly.If you trust these guys to close if they need to in a proper manner then these markets are the same as anyoother market you trade on intrade. They do provide some informaiton on the change of a closure and some information is better imo then none

Exactly -- it's easy not to buy if you consider it a lose-lose proposition (like "World to end in June 2009" -- kind of hard to collect on that one if you bet on the affirmative!). But you should find enough traders nibbling at this to get some interesting and useful information about Intrade's future.

the point isn't that tradesports will go bankrupt, it's that they will pull this little maneuver tradesports did and say that it isn't worth going on any longer, and then they'll cash everyone out at "last market price" and now those of you who used intrade to hedge some other event are stuck with naked exposure

I'm confident that when Intrade closes down in September 09 they'll pay everyone who was short, although they will probably still collect the 1% expiry fees and expire everybody at the last market price before the announcement.

I have seen few firms "close in a proper manner" in the last 20+ years, and "devil take the hindmost" behavior has in my opinion increased regardless of industry, size or country.

I am by no means singling out intrade - I have had no complaints whatsoever in my many-year relationship with them, and sincerely hope for their robust health.

But I have grave doubts that almost ANY firm in this day and age will have an orderly shutdown. Look at (just in the U.S.) Enron, Bear-Stearns and Lehman. Company assets were pilfered wholesale as employees ran out the door, critical records were destroyed or "lost", some key people went on "indefinite" vacation in other countries, some vendors artificially generated false billings, some customers refused to pay monies owed, etc. In 1933, the liquidators usually had a substantial portfolio of "hard" assets (even if of highly degraded value), such as land, rolling stock and ships, heavy machinery and mines. These were assets which people couldn't easily destroy or put in their pockets even if they intended to be larcenous. Not so with many firms now. One can't put a wheat farm or blast furnace in one's pocket. But now it is now far more possible for the "assets" of many firms to disappear in 5 minutes.

And the law isn't likely to be of much help. Prosecutors are generally not going to bring charges against the hundreds (or thousands) of people who might have taken their laptop home on the afternoon the company went bankrupt.

Despite the current turmoil I bet more than a few of the punters on here hadn't considered the risk of intrade going bust. Why would you bring it to their attention? It'll only harm liquidity. Several contracts at extreme prices with decent duration left on them just aren't worth trading if the market is correctly assessing your credit worthiness! Now that you've brought up this issue are you going to give us more colour on how a wind up will be handled?

Lets get some things strt:1)Delaney and this entire organization are incompetent greedy amateurs. 2)they can't word or define contracts, their fees are absurd, their policies and rules are absurd3)On the issue of "transparency" offering a contract for end of intrade has nothing to do with transparency. These ppl are morons and they could all be shorting contracts and work for TS/IT.4)Tradesports goes randomly out of business this week and intrade posts "going out of business contract". Sounds like a good move.5)I have tolerated this place for a long time, shortly I and all of my colleagues will be taking our money out of intrade.

LET IT BE CLEAR, there is a market need for a tradesports/intrade, this first run company shows you how poorly run a company can be when run by a teenager. All you need is - volume, a trading platform that isn't 10 yrs old, low fees, and competency for contracts, rules, transparency, etc. Like I told Delaney on the phone "I can't wait to see you go out of business, you're a clueless amateur passing off as a businessman/CEO"

See you all at the next futures market that is intrade/tradesports v 2.0

this is a gambling website...gambling is an illegal activity for US citezens. Thats why sportstrade was pulled, to keep up appearances. This site can only last so long until US regulators shut it down to US subscribers.